NS’s Moorman to shareholders: The best is yet to come

Norfolk Southern Corp. “has made great strides over its 30-year history, posting its best-ever performance over the past two years—and the best is still to come,” CEO Wick Moorman told shareholders at the company’s 31st annual meeting, held May 9 in Williamsburg, Va. “Our railroad is on track to continue to do great things as we continue emphasizing operating efficiency and productivity. I’m excited and optimistic about our company’s future.”

Moorman noted that even with a downturn in coal traffic in 2012, NS still recorded its second-best year for revenue, operating income, net income, and earnings per share, topped only by 2011:

“Our total traffic volume for 2012 remained about even with the previous year. Our merchandise volumes were up 2%, intermodal volumes were up 5%, and our coal volumes declined by 13%.

“In merchandise, we benefited from higher carloadings in the chemical, automotive, and forest products sectors, and we expect these trends to continue in 2013. Chemical traffic is being driven by the revival of much of the basic chemical industry in this country due to the growing production of gas and oil through directional drilling and hydraulic fracturing, along with the growth of shipments of crude oil to east coast refineries. Autos are up on account of increasing sales of automobiles, which is a good news story for the U.S. economy, and our forest products traffic is reflecting the growing signs of life in the housing industry.

“In intermodal, steady traffic gains were supported by our dependable service, competitive routes, and investments in public-private partnerships to improve rail infrastructure. We continue to see strong market forces encouraging the move of container and trailer traffic from the highway to rail, and we continue to invest to make that happen.

“Coal of course was a challenge, as the market continued its worldwide slump. Even though it remains a wildcard, we are confident it will stay an essential component of our business. We’re optimistic that we are at or at least close to the bottom for much of our coal business, and that higher natural gas prices and more normal weather patterns will mean that our thermal coal volumes will strengthen in the next few quarters.

“In 2012 we did a good job managing expenses, and in fact we reduced them 1%, largely through improvements in system velocity. This tight expense control and focus on improved productivity meant that even with a more than $500 million decline year over year in coal revenues in 2012, our operating ratio increased by only one percentage point for the year. We obviously prefer to see it going in the other direction, but in fact such a small increase is a positive reflection of our balanced portfolio of business and efficient operations.”

Moorman said NS’s public-private partnership investments in strategic rail corridors such as the Heartland and Crescent Corridors “position intermodal business as a major competitive strength. New intermodal facilities opened over the past two years help us build business, while creating jobs in communities and strengthening local economies.”

He praised the skill of employees and their efforts to sustain NS’s “industry leadership in safety, service, and environmental responsibility.